If a company were interested in knowing the effect of a single input change on the net present value of a project, then the company would most likely want to perform
A) a Monte Carlo simulation.
B) scenario analysis.
C) sensitivity analysis.
D) none of the above.

Question

Quizplus · Accepted Answer

Sensitivity analysis is a technique used to examine the potential impact of changes in one variable on the outcomes of a model or decision. In this case, the company wants to know how a change in a single input affects the net present value of a project. Sensitivity analysis can provide insights into how sensitive the project's net present value is to changes in that input variable. Monte Carlo simulation and scenario analysis are more appropriate when examining the impact of changes in multiple variables, rather than a single input change.

If a Company Were Interested in Knowing the Effect of a Single